The time has come to start the meeting to announce the consolidated financial results for the first quarter ended June 3039 for Hitachi Limited. The speakers are Mitsu Aki Nishiyama, SVP and Executive Officer, CFO Tomomi Kato, General Manager of the Financial Strategy Division Yasuo Hirano, General Manager of the Corporate Brand Communications Mr. Nishiyama, please. I would like to give you the explanation regarding the first quarter fiscal year twenty nineteen financial results. Please refer to the PowerPoint presentation.
Please refer to Page five, which is one-two. Consolidated statement of profit and loss. The first line is revenues, JPY 2,032,500,000,000.0 was recorded. 6% decline year over year was recorded. IT increased revenues, but other segments had declined in revenues.
For battery metals, battery chemicals, semiconductors and smartphones, automotive system, market impact result. And the Banking income adjusted basis is 124,300,000,000.0 yen declined by 16%. And IT Life segment increased, Hitachi Construction Machinery, Hitachi Metals, Hitachi Chemicals recorded losses. EBIT was JPY 182,500,000,000.0, a 2,000,000,000 yen increase year over year. We have been able to maintain EBIT similar to this month.
185,000,000,000 is the case for the first quarter. Next is Geomaterials segment. It was a decrease of 14% year over year. It was also the highest record ever. In terms of the profit information, please refer to Page 21.
There is supplementary information I wish to share with you. On Page five, I explained the profit and loss on a consolidated basis. This is being divided into the five secondtors total and listed subsidiaries total. On Page 21, Please refer to the operating income. The five segment total was 74,600,000,000.0 yen and the adjusted operating income margin was 6%.
Net income attributable to Hitachi Limited's stockholders was 103,800,000,000.0 yen For five secondtors total, this is a record. In terms of operating profit margin, 6% was highest ever for the first quarter ever. And the net income attributable to Hitachi Limited stockholders, this number is also at the highest ever. Market impact was felt at the listed subsidiaries. And the adjusted operating income was 49,700,000,000.0 yen and net income was 16,400,000,000.0 yen And adjusted operating income declined by 26,000,000,000 yen and net income declined by 13,400,000,000.0 yen For operating income declined for the listed subsidiaries, which was very significant.
So overall, operating income was negative. About non controlling 100% business or the BUs, business units, For these businesses, efforts were very significant, having direct contribution to the bottom line. Therefore, the overall structure has improved. Let's go back to the original PowerPoint presentation and refer to one-three. This is showing the factors affecting changes in the revenues and adjusted operating income.
Left hand side is the revenues. Impact of reorganization was 77,000,000,000 yen Selling of business. Hitachi Kokusai Electric deconsolidation impact was 27,000,000,000 yen Automotive Systems divestitures such as Clarion impact was 50,000,000,000 yen Total is 77,000,000,000 yen impact negative impact on reorganization. Foreign exchange impact was negative 25,000,000,000 yen Euro actually, dollar was positive about euro and yen strong yen impact is shown here. Others is 31,300,000,000.0 yen negative.
These are the negative impacts on revenues. For the Lumada business, there was increase, but there was a price decline as well as a revenues decline and others came in at minus 31,300,000,000.0 yen Right hand side is the adjusted operating income. Impact of reorganization was 5,000,000,000 yen negative impact. Foreign exchange, minus 2,500,000,000.0 yen 9,200,000,000.0 yen is the others. So that brings us to 131,300,000,000.0 yen or 6.5%.
There was also investment for growth to the tune of 7,000,000,000 yen increase. Inclusive of this, we ended at 124,300,000,000.0 yen for the first quarter. Next page is the revenues by market Japan and outside Japan. Please refer to the year over year column. Japan was 98%, outside Japan 90%.
So there was significant decline outside Japan. There was deconsolidation such as Clarion and Automotive System, Digesture and Kokusai Electric. It was included to the first quarter last year. If we make adjustment accordingly, then 98% will become 101% and outside Japan should be 94% Asia, 90% China is 93% Asia and India, other others, 86. North America 100% after adjustment.
Europe would be 96% and others 95%. And total will be 97% instead of 94% with adjustment. So we can see a significant decline in China as well as ASEAN, India and other areas. For ASEAN, Clarion business and divestiture as well as Automotive Systems was 67%. And if we exclude the consolidation, 81%.
Hitachi Metals, 79% and Hitachi Construction Machinery is 82%. You can see that China saw significant new trend. For ASEAN, India and other areas, Korea, Taiwan and High-tech related was 88% year over year Hitachi Chemicals, 88% Hitachi Construction Machineries, 87%. You can see that there was decline in China as well as in Asia. Significant decline in revenues were recorded.
Please refer to the next page, which is the balance sheet and cash flows. At the very top, total assets was JPY 9,007 and 32,700,000,000.0 compared to March 31, increased by JPY 106,000,000,000. IFRS 16 has had an impact on balance impact. There have been changes in accounting. Therefore, in the beginning of the term, impact was $220,000,000,000 yen asset increase was reported and interest bearing debt to the tune of 200,000,000,000 yen also increased on the liability side.
But receivables decreased, so total was increase of 106,100,000,000 Cash conversion cycle is shown here to be sixty six point four days. That is a two point nine days decrease from change from March 3139. DE ratio was 33.8% and the DE ratio was 0.31x and stockholders' equity ratio was 33.8%. And cash flows from operating activities is 78,800,000,000.0 yen which was a decline of 55,400,000,000.0 yen Last year, Energy's the advance payments have gone away and IEP project has run its course, closing to the end. These two factors have impacted the decline in cash flows from operating activities.
Cash flows from investing activities was 105,100,000,000.0 yen similar to previous year. There have been stock acquisition as well as CapEx reduction having an impact. Therefore, the cash flows from investing activities was maintained at the level of last year. Free cash flow declined by 56,600,000,000.0 at 26,200,000,000.0 yen Next page onward, I would like to talk about the segment information. First of all, starting with IT.
3% increase in revenues was recorded. Expansion of the system integration business as well as sales increase of storage and PC service in Japan have contributed to the 3% increase in revenues. As a result, with the increase in revenues, operating income increased by 5,100,000,000.0 yen year over year. This also was impacted by the strategic investment for expansion of the Digital Solutions business. Nevertheless, we were able to record an increase of JPY 5,100,000,000.0.
EBIT increased by JPY 13,600,000,000.0. This is increasing adjusted operating income gains of selling the land of former production basis. Energy, the decrease in revenues due to the business transfer of power receiving and transforming facilities business for industrial field and decrease of large scale projects in Power Generation Solutions business. Year over year change is 88%. And adjusted operating income declined as well.
Next page is Industry. There was impact from sales decrease of Industrial and Products. And slight decline was recorded even though sales increase in Air Conditioning Systems business for Industrial Field was positive. And operating income declined because of decrease in revenues. Mobility was slight decline as well.
In the Railway System BU, IEP in The U. K. Has run its course in terms of sales generation. About in Japan as well as in Italy, the railway systems revenues have increased. There was also impact of foreign exchange for railway business as well as building business, therefore, a slight decline at 99.
But adjusted operating income increased by 2,200,000,000.0 yen This is because of the cost reduction as well as profitability improvement in the Railway Systems business. EBIT increased by JPY26.3 billion. This is because of the gains by selling a part of Agility Trains West stocks. Next page, Smart Life segment. There was negative impact of divestitures on Automotive Systems business, around JPY 50,000,000,000 of Clarion, having a negative impact.
For adjusted operating income, an improvement of JPY 2,800,000,000.0. Contributing factors include profitability improvement in Home Appliance businesses due to cost reduction. Next, Hitachi High Technologies. Sales increased for semiconductor processing equipment in The U. S.
However, there was a negative impact of sales decrease of liquid crystal display exposure systems at 93% year over year. Because of the decrease in revenues as well as increase of R and D expenditures led to a decline of 2,500,000,000.0 yen in terms of adjusted operating income. Hitachi Construction Machinery, a decline of 2% year over year. Most of it is because of the impact of the foreign exchange. The adjusted operating income was minus 4.6 increase in indirect expenses was the negative impact here.
Therefore, declined by 4,600,000,000.0 yen year over year. Hitachi Metals revenues was at 90% year over year. Significant decline was recorded. This is because of a decrease in demand for automobile as well as semiconductor and FA. In addition, there was a negative impact of the business transfer of the aluminum wheels business services.
Therefore, declined by 10%. Because of the decrease in revenues as well as revaluation loss on inventories has led to the adjusted operating income deterioration by 10,400,000,000.0 yen Next is Hitachi Chemicals. Revenues were at 92% level because of the decreasing demand for semiconductor and automobiles. In line with the decline in revenues, the adjusted operating income declined by 4,200,000,000.0 yen Next page, Others. You can see that adjusted operating income has declined.
This is because of the negative impact of deconsolidation of Hitachi Kokusai Electric. Corporate items and nomination EBIT decreased by 20,100,000,000.0 yen This is because of the absence of gains by selling Hitachi Kokusai Electric stock recorded in the previous fiscal year. That is the reason why profit has declined. For Social Innovation business core businesses, overall, have seen improvement in profit, but for the four listed subsidiaries have been impacted by the negative market. Overall, there was profit decline.
Next page one-eleven topics, progress of Lumada business. In the first quarter, Lumada business revenue was JPY251 billion, which was 13% increase year over year. Public sector and the social infrastructure related business increased. Especially Lumada core business, we saw a 34% increase year over year in public and government related social infrastructure. We increased our collaborative business and fintech, blockchain related businesses.
We provided new solutions. And in Mobility, the rolling stock and the signal maintenance and the escalator elevators, maintenance business and others, Lumada is being applied to more businesses now. And on the second lower half, can see the topics of Lumada. We rolled out vehicle sharing service for Thailand's logistics sector with Hitachi Transport System, And we also started a partnership with Virtusa Corporation in America to provide AI based solutions for financial field. We have a dedicated team on both sides to develop this business.
And in expanding the co creation business utilizing digital technology, we have two examples. We started proof of concept of a new digital ticketing solution for the public transportation operator in Italy and also received an order from TOA Oil for high temperature parts management platform for gas turbines. Next page, Slide one-twelve. First, the progress of structural reforms in Automotive Systems business. We agreed to acquire Chassis Brakes International to create an industry leader in automotive safety solutions.
It is scheduled to be completed by the 2019. And we agreed to transfer shares issued by Palenet Company, which engages in rental business of cargo handling materials, pallets, to Hitachi Transport System. And in strengthening of management base of railway systems businesses, as I mentioned earlier, we sold a part of shares of Agility Trains West Limited additionally. Of the 70%, we sold 30% in 2018. And in the first quarter, in April, we sold additional 15%.
So now we have 25%. Further expansion of global business and mobility sector. We received an order for delivery of elevators, escalators and moving sidewalks for the Thailand International Airport and received an order for the delivery of elevators for large scale office buildings in India, Hyderabad and received an order from Trinitallia in Italy for high speed train sets with Bombardier transportation in June. Next page, two-one, you can see the outlook for our fiscal year 2019. This was announced on April 26, and we kept this unchanged.
Revenues to 9,000,000,000,000 yen and adjusted operating income, $765,000,000,000, 8.5%. And net income attributable to Hitachi Limited stockholders, $435,000,000,000. This remains unchanged. So segment figures have also remained unchanged. That completes my information.
Thank you.
We will now open the floor for Q and A. And please wait for the microphone to be brought to you. The floor is now open. Question. Thank you very much for the explanation.
Regarding Page 21 that has been provided, you have made the comparison between five secondtors total and listed subsidiaries total. This is very easy to understand. Thank you very much. Regarding the operating income for the first quarter is 124,600,000,000.0 yen And what was the level that was compared to the outlook? And how does the 74,600,000,000.0 yen compare?
And this 49,700,000.0 yen how does it compare according to the compared to the outlook and forecast? Well, by quarter, we are not giving detailed explanation outside. But overall, for the listed subsidiaries, 5,000,000,000 was underperformance compared to plan because of Hitachi Metals as well as Hitachi Chemicals overall underperformed by yen 5,000,000,000 against the plan. On the other hand, for five sectors total, overall, for each of the sectors, there were improvements made. Total was JPY5 billion improvement centering on IT improvements that we made.
Other sectors also improved. Total was JPY5 billion. Yen So altogether, we are proceeding according to plan. You said that IT was particularly strong, 13% increase was shown and annual 4% decline is the plan. It seems that you are outperforming in this area.
ATM decline was factored in. But in the first quarter, what were the areas improved? And are there improvements mean for the businesses that looked unfavorable? Please give supplemental information. For the first quarter, the difficulties and challenges have been affected in ATM is continuing to be difficult.
For financial business, SI in financial, last fiscal year we had major projects, which have run its course now. And therefore, major projects for financial sector is decreasing. On the other hand, in the other solutions for financial business is increasing in terms of demand. For example, FinTech as well as AI for financial services as well as labor saving digital measures have strong demand. Public sector as well as industry areas have strong demand as well.
Front business, SI business, therefore, overall is outperforming the plan even though Financial sector business has declined slightly. It is more than offsetting the decline. Thank you.
I have three questions. First, Agility Trains sales. So what part of your stake did you how much stake did you sell and how much do you have left? And in automotive, because of the reorganization, you've been suffering from operating income decline. But it seems like for a declining revenue, your operating profit is fairly well.
So will this improvement start continue in the first half? And third Point, South Africa. If there are any progress, please let me know. The construction seems to be delaying or the operation seems to be suspended according to some mass media reports. So if there's anything you could update us on?
First, Agility Trains West. This is the train operation company or rolling stock. It's not our rolling stock and no company. It is the train operation company's stock. We originally had 70%.
And in fiscal year twenty eighteen, we sold 30%. And this time in the first quarter, we sold additional 15%. So we now have 25% left. So for what price? We may have some additional sales or Agility Trains East.
We have stake in Agility Trains East as well. And once the train operation starts, the stake will decrease, reduced. So the price may impact the selling price at that point in the future. So I would like to refrain from mentioning the price. And your next question on whether the five secondtors' favorable condition continues into the second half.
So materials business is difficult, but the five sectors centering on IT is doing well. So whether this will continue till later in the year. Solutions business is strong, especially according to BOJ's Sankang on July 1, the software investment in the capital expenditure. The survey result is 12.9% up year on year, and we feel that that is actually the case. Labor saving in manufacturing and non manufacturing sector, labor saving is focused on the production, streamlining and quality assurance.
And financial institutions are using fintech and AI more. And the traditional SI business, ERP related package software, the SI business related to that is seeing strong demand. So in IT sector and industrial sector, we're seeing this demand. On the other hand, products business, business environment is difficult. So with the strong solutions business, we have a tailwind with short delivery timing.
So we will accumulate these short delivery timing projects products. Now the South African project, The arbitration progress, we have the confidentiality agreement, so I cannot comment on that. But regarding the project cost, we are constantly checking the situation. And if we see any changes or fluctuations, we will review the cost and provisioning of reserves. And we've been doing this, but there's nothing to update on the changes in the negotiation.
Additional comment on Automotive. On Page 26, Life segment information is disclosed. Page 26, Revenues, 78%. So this seems like a big dip from last year, but this is mainly the Clarion business divestiture. So excluding that factor, China and North America, there is a revenue decline, sales decline, but it is a slight decline, only a slight decline.
On the other hand, operating income is minus 300,000,000 yen It seems like a decline, but excluding the business divestiture, we are conducting cost reduction. So the operating income increased. So in real terms, it is increase in operating income. One more additional point. Agility Trains, this is not the rolling stock, but it's a rolling stock lease company, not operation, but lease company.
I have one question. It overlaps with the other question before me. Regarding Automotive Systems, in the fourth quarter of last year, I understand that situation has improved. But in the first quarter, if we look at the operating profit margin, it is 3% or even less. So it has reverted back to the previous state.
What happened after the improvement in the fourth quarter? And how did the first quarter fare vis a vis the plan as well as second quarter and onwards? What is the outlook? The first quarter revenues tend to be small from the beginning. Therefore, is true that we achieved 7.9% in the 2018.
But it is not abnormality that pushed down in the first quarter, it is seasonal factor. On a quarter by quarter basis, we can see improvement in this business. There is still room for reducing costs further. Loss cost reduction is not enough yet. All costs, direct material, indirect costs must be reduced.
However, we shall continue these activities to reduce cost. Productivity base in North America, there is a significant turnover of people. But this problem has or is already behind us. But there is still loss cost incurred in other areas. We shall continue to reduce loss cost for this fiscal year and onward.
Additional question. You said that well, we talked about the comparison with plan that there was upside of JPY 5,000,000,000. And there have been improvements in various segments. Well, AMS, We can see that our plan, it is improving against the plan. That was additional comment.
Thank you. Question. I have two main questions. First, in your management policy, you talked about capital allocation, yen 4,000,000,000,000 funding side allocation and allocation. So on a funding fund procurement, three years operating cash flow, 2,500,000,000,000.0 and bank borrowing, 1,000,000,000,000 and asset sales, 900,000,000,000.0.
And allocation, M and A, 2,500,000,000,000.0 CapEx JPY 1,600,000,000,000.0 and shareholder return JPY 400,000,000,000.0. Is this breakdown roughly correct? In the medium term plan announcement and in the sector IR briefing, we've been mentioning these numbers and it has not changed much. So operating cash flow, 2,500,000,000,000.0 plus asset sale and increase in bank borrowing.
So that's 2,200,000,000,000.0
to 2,500,000,000,000.0 yen We use that for growth investment and M and A. So this structure has not changed. So based on that, my question is operating cash flow. The current quarter is seasonally small, but the operating cash flow does not seem to be large. So 2,500,000,000,000.0 divided by three, you will need a certain amount per year.
So if this progresses, which item will improve? Do you have any outlook? In the previous medium term plan, the operating cash flow margin against the operating margin was low. So the inventory increase was a big factor. So we thought the ratio was too low.
But this operating cash flow margin is now coming close to operating margin, operating profit margin to secure KRW2.5 trillion. However, in the current quarter, in the first quarter, Hitachi Construction Machinery inventory increased. And Hitachi Construction Machinery and Metals, we reduced the procurement and so payables decreased. And so it seems like it worsened year over year, but now it's being normalized. So that's how we want to secure the level.
In parallel, we are also selling assets. So with asset sales, we want to secure a source for investment. Thank you. Question. In the capital allocation, if you are to focus on shareholder return compared to the previous three year, in the next three years, it seems to be increasing.
Your plan this year based on the assumption that your plan this year is comparable to last year. And if dividend remains unchanged, it may fall short against the progress for the next three years. So which point will be your focus in your increase in shareholder return? As I've said before, shareholder return, we do not give numbers on shareholder return. So CapEx and shareholder return, 1,800,000,000,000.0 to maximum 2,000,000,000,000 yen is our plan.
So growth investment and investment capacity capability or firepower will be considered and increase our shareholder return along with the increase in profit. And compared to the 2018 medium term plan, we want to increase the shareholder return going forward.
Any other questions? Thank you very much for the explanation. I have three questions. The first question is confirmation regarding numbers. In the first quarter, growth investment was 7,000,000,000 yen Is it all IT?
Please give me the breakdown. Well, it's varied. The breakdown of 7,000,000,000 yen will be provided. So half or 3,000,000,000 yen is IT. This is the most significant portion.
Others include billion for Mobility and listed subsidiaries JPY1 billion and industry around JPY 500,000,000.0. That is the basic breakdown. To your second point, regarding South Africa arbitration, We mentioned that if there is going to be change in cost, it will be reflected accordingly. That was the comment made. But for this project, is the reserves increasing?
You said that if there is going to be increasing costs, are you saying that provisions will increase, reserves will increase? If that is the case, please elaborate. There is no significant increase, but we are making reviews accordingly. As already mentioned, for major projects, there is no change significant there is no significant change. But in terms of foreign exchange as well as cost will be taken into consideration to make appropriate adjustments.
Third question is regarding ABB power grid business. For due diligence, have you made any progress? Please comment. I understand that there is about 200 or 100 basis altogether. What for sales as well as are there any surprises?
Please elaborate. For ABB, there are many bases, major bases. We have visited and made a confirmation. Regarding post merger integration as well as the process for carve out are being worked on by the two parties and everything is proceeding basically according to plan.
I have two questions, which are related. First question. First quarter in total was in line with the plan. Your direction in the second quarter, will it be like is it progressing like first quarter or not, Fortunately or unfortunately, you are weak in FA, so will this help you? Up to second quarter, last year was very strong.
So at this pace, last year was operating income exceeding 190,000,000,000 yen So on Q on Q, it's the same pace on Y on Y, maybe 15% down. Is that the momentum you're expecting? So if you could first talk about the momentum. Second quarter, five secondtors and the listed subsidiaries,
both
will be having the same business environment as the first quarter. Products, especially materials business, recovery is not foreseen yet. So second quarter will still be difficult, and that is the assumption for our measures of reducing fixed costs. On the other hand, solutions business, demand is strong. Looking at the first quarter's demand, demand is declining in Hitachi Metals and Hitachi Chemicals.
So for five sectors, the demand is robust. The orders is robust. The overall orders in Japan is 103% and overseas is 99% year over year. So overall, 101% year on year. Now for further analysis, the Hitachi Kokusai divestiture and AMS, Clarion sales and foreign exchange, 25,000,000,000.
If we exclude these factors and correct it, both Japan and overseas was 106% year on year. So that's the orders. Therefore, materials business is difficult, but in other business, five sectors, orders are strong. Volume is increasing, especially in IT on a sector by sector basis, on a year on year basis, of the 106%, IT is 110% and Energy is 100%, flat Industry, 120% year on year Mobility, 152% year on year. And this is Railways, so there are some long term businesses.
And Life, Smart Life, 101%. So overall, we see very firm situation. In the second quarter, we think the trend will be similar to the first quarter. Regarding the five secondtors, overall, we think the situation is firm and robust. My second question is, so this time, you did not revise your full year forecast.
So what is your thinking behind it? In the first half, operating income may be 10% or so decline. Then in order to achieve the full year plan, second half will have to be 10% up. So it's not visible enough in the first quarter. So is it just it just ended not revising?
Or do you expect something some positive factors expecting in the second half? You have big domestic ratio and the consumption tax will be raised in October. So you may not have an impact on your home appliance business. But since last time around, after the April, production declined. So it will not be easy for you.
So the reason you did not revise your full year forecast? Products and Materials business are very unforeseeable. Semiconductor in some regions or some clients, we think investment may recover, but we don't know when that will happen. And therefore, like first quarter, material business will remain difficult. That is our assumption.
So that's the assumption we will consider. And as I said earlier, solutions business and other businesses are strong. Products businesses as you mentioned earlier may be impacted somewhat by the impact in manufacturing separately. There may be some production labor saving to overcome The labor shortage and the financial sector, there is some investment in purchasing products and services. But the negative impacts and positive impacts will quantified in the second quarter.
We will scrutinize further. So that's why we did not review the forecast. So it's not to change it. You have good traction with IT and that's why you are confident and not changed? Yes.
So in the water flow chart, looking at the first quarter, the impact of the materials, raw material cost is not shown. So on the first quarter, if you could talk about that. Raw material cost, there are ups and downs. But overall, in the first quarter, 3,000,000,000 negative impact from raw material cost. And with cost reduction, we completely offset that.
So not just raw materials, but you have quite some volume of storage and hardware. Looking at other competitors, memory and electronic materials is declining, enjoying some impact from that. What about you? Cost reduction. The JPY9.2 billion minus in the waterfall chart.
Let me give you the breakdown. Net revenue contribution and improvement in operating income is JPY4.5 billion, and the other revenue decline is JPY6.6 billion negative. And price down, storage, automotive systems, that's JPY10.5 billion negative. And labor cost and depreciation up increase, that's a negative impact of JPY 20,000,000,000. On the other hand, cost reduction was JPY 23,300,000,000.0 plus.
And so that's JPY9.2 billion. In the JPY23.3 billion, the increase in raw material, the JPY3 billion is included. But of course, with components, there were some positive factors. So that's 23,300,000,000.0 yen Thank you.
Any other questions? I have two questions. So you have provided information regarding the five sectors as well as listed subsidiaries. I'm sure that listed subsidiaries cannot be controlled completely, but the materials companies are struggling. And we've only seen announcements in a limited manner, but it seems that for your materials company, it seems that it is not performing well.
So there are rumors that you will be selling some of these businesses. What is your elaboration on this? There is no governance issues for materials. We have two companies, Hitachi Metals as well as Hitachi Chemicals. For 2018, from the latter half, the market environment has deteriorated significantly.
Furthermore, it is yet to recover. First quarter remained the same, therefore, the environment remains difficult. For each of these companies, whether it be Hitachi Chemicals as well as Hitachi Metals and Chemicals are reducing costs. And on part of Hitachi Metals, furthermore, the market remains difficult. Therefore, cost reduction measures will be stepped up and structural reform measures will be implemented.
And we have decided to withdraw from low profit businesses. Measures have already been implemented. And on our part, are confirming the details thereof. But I would like to emphasize that the market environment remains very difficult. Therefore, we are requesting further acceleration of these measures.
The chemical companies with wafer business is significantly impacted by the semiconductor cycle. But if the semiconductor cycle is declining, the cost reduction has been made from the past. But strategically, compared to competitors and rivals, it seems that you are behind according to the results. Please comment further. Hope you can engage in discussions with these listed companies.
We are looking at short term measures as well as mid- long term strategies. We are conducting reviews of these plans and strategies. And for the time being, cost reduction acceleration will be necessary and the scale of cost reduction must be enhanced further. We are checking on these measures. And once we have a recovery, we hope that profitability can be ensured in the recovery phase.
That is the reason why we have to accelerate the measures today. We are confirming the promotion of such measures. Question number two is regarding IT Solutions. The environment is very good for the listed companies. But one concern that is being raised is the consumption packs as well as the Olympic Games.
There is perhaps front loading of business. So there may be a need to be more cautious in the second half. Please elaborate. Obviously, the consumption tax will have an impact, but we don't know how this is going to manifest in terms of negative impact. Therefore, as I have already mentioned, new areas as well as labor saving measures, Demand is very strong.
Therefore, we have to ensure the delivery resources, so short delivery products can be provided. So that we believe that incremental cost factors can be absorbed in this process. Thank you.
Time is running out, so we will take the last question. With that, we will close today's briefing. Thank you very much.